Oct. 23 (Bloomberg) -- Ethanol traders revived complaints
about prices assessed by Platts five months after the energy
news and price publisher was raided by the European antitrust
officials probing potential manipulation in oil markets.

Platts ethanol prices aren’t reflective of the market and
changes to its methodology are contributing to price
fluctuations and disrupting shipping schedules, some traders
said at a forum organized by Platts at its offices in London
yesterday, which was attended by about 38 people. The publisher,
a unit of New York-based McGraw Hill Financial Inc., said its
assessments reflect market conditions.

“The absurdity of the system today is that, as producers,
our interest is to send our product everywhere but not in
Rotterdam,” the European oil-hub Platts uses to establish
prices, said Arnold Kolin, Marckolsheim, France-based sales
director of biofuels producer Tereos Internacional SA.

European Union antitrust authorities raided the offices of
Platts, Statoil ASA, BP Plc, Royal Dutch Shell Plc and Argos
Energies in May on allegations of collusion in setting prices of
crude, refined products and biofuels. The EU inspected Abengoa
SA, owner of continental Europe’s biggest bioethanol plant, as
part of a probe into potential price manipulation. The
authorities have yet to announce their findings or charge anyone
following the investigations.

Illiquid Market

Europe’s ethanol market is illiquid, and with a limited
number of trades considered in the Platts assessment process,
prices don’t reflect fair value, according to the traders.

“Liquidity is a function of the market,” Simon Thorne,
Platts global editorial director of agriculture and chemicals,
said in an e-mailed response to questions. “One would expect
less liquidity in ethanol than in a major product such as
gasoline and diesel,” and fewer active participants given the
smaller size of the market, he said.

Platts assesses prices through bids, offers and trades made
by phone, instant message or online during prescribed times,
known as the market-on-close process, or MOC, which subscribers
to its service can see.

Price swings are exaggerated by low volumes underlying the
assessments and ethanol producers don’t sell in Rotterdam
because the area is oversupplied and prices are low, Kolin said.
Increased sales in Rotterdam could erode margins and force some
plants to close, he said.

“Our goal here is not to protect an industry, protect a
margin,” said Jorge Montepeque, global director of market
reporting at Platts. “We’re just the messenger of the market
forces.”

Price Swings

Changes to Platts methodology, including allowing bids and
offers to be adjusted by 1 euro ($1.38) a cubic meter every 20
seconds and shortening its time slots for assessing prices, have
contributed to large price swings and shipping issues since they
came into effect Aug. 1, traders said at the meeting.

Prices for ethanol barges in the Amsterdam-Rotterdam-Antwerp oil hub were at 646 euros a cubic meter on Aug. 5 and
dropped to 556 euros two weeks later, according to weekly data
from Kingsman SA, a biofuels researcher that was acquired by
Platts in November 2012. Prices have fluctuated by 7 euros to 56
euros a week since August.

“It makes your price assessment process not very
accurate,” said Erik Werner, a senior trader at Swedish
producer Lantmannen Agroetanol AB. “Why does it change so much
every day?”

Operating Effectively

Platts said the market is “operating effectively” and no
shipping disruptions have been reported. The new guidelines
“have not exacerbated or caused volatility in the market,
rather we believe any moves in price to be a result of market
conditions,” Thorne said in the statement.

Ethanol traders criticized Platts at a June meeting about
the accuracy of its prices and vetting procedures for inclusion
in the MOC system. Pannonia Ethanol, a Hungarian producer,
complained to the EU last year, alleging Platts denied it the
opportunity to participate. The company isn’t involved in the
MOC process.

Eligibility criteria should be made transparent for new
entrants, traders said again yesterday. Platts said its system
for vetting participants is an internal editorial process.

“What we are looking for is that a counterparty has
established a critical mass of potential counterparts,”
including meeting requirements for credit, logistics and
compliance, Thorne said at the meeting. “It’s important that
people who are wishing to be involved in the process are trading
in such a way that is acceptable to the market at large and in
line with the conventions of that market.”

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